March 28 (Bloomberg) -- President Vladimir Putin’s
annexation of Crimea is damaging Russia’s creditworthiness,
making some of Europe’s most indebted countries look better by
comparison.

The CHART OF THE DAY shows that for the first time in four
years, the cost of protecting against a default by the world’s
biggest energy-exporting nation is higher than for Portugal,
which needed an international bailout just three years ago. The
yield on Russia’s ruble bonds maturing in August 2023 was at
9.15 percent today, versus 3.93 percent on Portuguese securities
due in October 2023.

“Russia is a risky story -- there are clear signs of
capital flight,” said Christoph Kind, head of asset allocation
at Frankfurt Trust, which manages about $20 billion. “A lot of
money is flowing out of emerging-market bonds, and it seems to
flow into European markets, especially peripheral bonds.
Russians themselves are trying to put their money out of the
country and also international investors are drawing back
because of the political risk.”

Russia’s worst standoff with the U.S. and its allies since
the Cold War, after Putin’s troops occupied Crimea, is
threatening to tip the economy into recession. Even before
sanctions were imposed on the nation, Russia was facing the
slowest growth since 2009, with the $2 trillion economy
expanding 1.3 percent in 2013. Investors pulled $5.5 billion
from Russian equities and bonds this year through March 20,
according to data compiled by EPFR Global.

The yield on Portugal’s bonds due in February 2024 fell to
3.98 percent today. That’s the first time since 2010 that the
benchmark 10-year yield has dropped below 4 percent, having
tumbled from a record 18.3 percent in January 2012. The nation
is seeking to emulate Ireland and regain full access to debt
markets with the end of its 78 billion-euro ($107 billion)
rescue program approaching in May.